Dean Ridlon - Director of IR Gary Greenfield - Chairman and CEO Joel Legon - CFO Ken Sexton - CAO

Paul Coster - JP Morgan Steven Frankel - Canaccord Adams Jim Ricchiuti - Needham & Company Mike Olson - Piper Jaffray Alan Davis - DA Davidson Andrew Abrams - Avian Securities Chuck Goldblum - Emancipation Capital Jeff Lipton - Connected Capital

Good day and welcome everyone to the Avid Technology First Quarter Earnings Results Conference Call. Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to the Director of Investor Relations, Mr. Dean Ridlon. Please go ahead, sir.

Thank you, and good afternoon. I'm Dean Ridlon, Avid Technology, Inc.'s Investor Relations Director. I'd like to welcome you to today's call. Before we begin, please note that this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about Avid's future performance. There are a number of factors that could cause actual events or results to differ materially from those indicated by such statements, such as competitive factors, including Avid's ability to anticipate customer needs, pricing pressures, our ability to execute our strategic plan, and adverse changes in general economic or market conditions, particularly in the content creation industry. Other important events and factors appear in Avid's filings with the U.S. Securities and Exchange Commission. In addition, our forward-looking statements represent our estimates only as of today, April 24, 2008, and should not be relied upon as representing our views as of any subsequent date. Avid undertakes no obligation to review or update these forward-looking statements. During this call, we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. The most directly comparable financial measures calculated in accordance with GAAP and a reconciliation of GAAP measures to these non-GAAP measures are contained in the press release announcing this quarter's results and available in the Investor's section of our website, www.avid.com. And now I'd like to introduce Gary Greenfield, Avid's Chairman and CEO.

Thank you, Dean. I'd like to welcome you to our first quarter 2008 results conference call. With me on the call are Joel Legon, our CFO and Ken Sexton our Chief Administrative Officer. As you know, Ken and I, along with several other executives are relatively new to Avid's management team. That said, I believe that as a team and as a company, we've already made significant progress towards our goal of becoming a customer-centric business with accelerated growth and improved operating margins. Understandably, the majority of our efforts to transform the business will not impact the financial results until future quarters, as we are not looking for quick, one-time payoffs, but rather long-term increases in shareholder value. But we are fully engaged on this transformation and are already making progress. At the high level, we are conducting a strategic review of all of our businesses, focusing on our loyal passionate customers to ensure we're delivering the highest quality products they require, re-energizing our dedicated employees, working to transform our operating model to make it more efficient and optimizing our capital structure. All of these initiatives support our goal of becoming a customer-centric business with accelerated growth and improved operating margins, which will lead to higher shareholder value. Now, I'd like to turn it over to Joel to go over our financial results in detail. Joel?

Thank you, Gary and good afternoon, everyone. Before I discuss the results, I wanted to highlight a change in our financial presentation. Historically, we've allocated to each of our three business units a percentage of certain corporate operating expenses such as finance, human resources, legal, and some information technology. Beginning this quarter, we are reporting a contribution margin for each business unit that excludes these corporate infrastructure costs and operating expenses to provide a clearer view on the operating performance of each business unit. We are also presenting our 2007 comparative results using this methodology. Now, let's look at the quarter. Revenues to Q1 were $198.3 million and our GAAP net loss was $21.1 million or $0.54 per share on 39.4 million Avid shares outstanding. Our earnings release provides a table of certain items that are excluded from our non-GAAP results. For Q1, these items totaled is $9.4 million and consisted of amortization, stock-based compensation, restructuring costs, and related tax adjustments. When we measure the performance of our business units and disclose our business segments' results externally, we do not include these items. Adding the $9.4 million in charges to our GAAP loss, results in a non-GAAP net loss of $11.7 million for the first quarter. Using shares outstanding of $39.4 million, non-GAAP loss per share was $0.30. During the quarter, we invested approximately $3.5 million or $0.09 per share to assist in the transformation of our business. These investments included approximately $2 million related to strategic consultants assisting management. Also included in approximately $1.5 million of management transition expenses such as severance and recruitment fees. GAAP gross margins were 46.7% including $3.3 million of amortization and $230,000 of stock-based compensation. Without these charges, grow margins would have been 48.4%. While gross margin percentage for both audio and consumer video increase sequentially, these improvements were offset by a decline in professional video. Professional video gross margin percentage was affected primarily by lower revenue on fixed over head. Audio's gross margins were higher primarily due to favorable product mix, while consumer video gross margins also increase sequentially, as you will recall, the unit's gross margins were negatively affected in Q4 by the write-off of inventory related to the discontinuation of an OEM product in our PCTV hardware business. Operating expenses were roughly flat sequentially and up modestly year-on-year. The year-on-year increase was primarily due to higher, unallocated corporate costs and expenses largely consisting of the consulting costs and management transition expenses mentioned earlier. Sequentially, corporate costs and expenses were essentially flat. On our last call, we talked about investments we are making this year that we expect will provide meaningful returns in the future. During the quarter, these investments will primarily focus on the areas of marketing and customer support as well as IT, finance, and HR infrastructure. While we are making these investments, we are also working hard to identify opportunities to reduce costs. Now, let's talk about the operating performance of our three business segments. Keeping in mind the financial presentation change and that in addition to interest, we excluded the following items from our business segment results in Q1. $22.9 million of corporate infrastructure costs and operating expenses, $6.6 million of non-cash amortization of intangibles, $2.1 million of non-cash stock-based compensation, $1.1 million of restructuring charges related to re-organization plans within our professional video unit, and $434,000 of tax adjustments to the items I just mentioned. Professional video revenue was approximately $94 million, down both sequentially and year-on-year, reflecting the recognition of fewer large broadcast deals during the first quarter and lower run rate product sales. Remember that we a particularly strong fourth quarter for large deals. Professional video gross margins as a percentage of revenue were down sequentially and year-on-year primarily due to the lower revenue plus reserves associated with the transition to our new editor line -up. Gary will talk about the new editors in a few minutes. Expenses were roughly flat both sequentially and year-on-year. Audio revenue in Q1 was down both sequentially and year-on-year, the decreased revenue was due to the slowdown in the Icon business and lower Pro Tools LE product family sales. Gary will discuss what impacted these product lines in a few minutes. Audio contribution margin declined sequentially due to the lower revenue and relatively flat gross margin percentage and operating expenses. It is important to note that audio is making incremental investments in product development, which are impacting the unit's margins. Year-on-year, lower revenue was only partially offset by higher gross margin percentage and relatively flat operating expenses. Reflecting holiday seasonality, consumer video revenue was down sequentially to $30.8 million, with gross margin percentage and operating expenses flat. Year-on-year, revenue was up nearly 13% but lower gross margin percentage and slight increases in operating expenses resulted in consumer video's contribution margin declining slightly. Turning to the balance sheet, our cash balance decreased by approximately $74 million to $150.4 million at March 31 primarily due to the use of cash repurchase over $93 million of stock or approximately 4.3 million shares during the quarter. This repurchase represents approximately 10% of the shares outstanding as of the end of 2007. Inventories increased sequentially due to the lower revenue. We continue to focus on inventory management and our goal is to reduce inventory modestly below the December 31, 2007 balance by the end of the year. Deferred revenue increased due to seasonal renewal of annual maintenance contracts and the recognition of fewer large deals during the quarter. While DSOs increased sequentially to 54 days, that figure is in line with our historic average. In summary, operations generated approximately $20 million in cash with $4 million invested in capital expenditures and the remainder applied towards the stock repurchase. And now, I would like to hand things back to Gary for the discussion of the operations of each of our businesses. Gary? Hello. We're having some technical difficulty with Gary.

Sorry, Joel. Thanks Joel, I'll start with our professional video unit. Last quarter, we discussed that we'd be taking in some new approaches in terms of our sales and marketing initiatives, including the decision not to exhibit at NAB, historically, our largest trade show. That was a controversial move in some ways, but I am happy to report that the initial response to our new campaign, which we call New Thinking has been very positive. Starting with a press campaign that included direct outreach to bloggers and other influential customers, and continuing with product launch events drawn between 500 and 1,000 customers in Hollywood and Las Vegas, we're getting the message out that this is a new Avid. Under the leadership of new Executive Vice President and General Manager, Kirk Arnold, the team has taken some decisive action. Over roughly a four-week time span, we've improved and expanded our online customer support capabilities, upgraded and improved our Avid community site to incorporate many Web 2.0 features such as user generated tips and tricks, real time chat, and user profiles, introduced aggressive new media composer pricing for students to better reach the next generation of users, and engaged in direct and systematic dialog with customers, not only through events but also focus groups and online dialogue. Importantly, we announced an exciting new editor product set for the broadcast and post production marketplaces, which is targeted at our client's priorities, quality performance and value. We expect to ship the new products late in the second quarter. The feedback we have been getting from this campaign has been very positive. Customers, resellers, and business partners, are responding well to our open and direct approach as well as the product features, quality, performance, and value. Since most of these activities are taking place late in the quarter or early in Q2, it's too soon to see that momentum reflected in our Q1 results, but we are very encouraged by the response and feel we're making good progress. Turning to audio, it was overall a challenging quarter, due in part to incompatibilities between the currently shipping version of Apple's Leopard operating system, and our Pro Tool's line, which caused lower sales especially in the 003 family of products with our entry level Pro Tools LE and Empowered Lines. Full compatibility with the latest release of OSX Leopard is our number one priority within Audio and we are working closely with Apple on this issue and expect full compatibility across our Pro Tools line soon. In addition to Pro Tools LE, sales of our award winning ICON line of integrated studio consoles were a little sluggish due in part to the overall economic climate causing customers to defer purchasing decisions. Our venue line of live sound products continue to do well based in part on the successful release of the Mix RAC and also the buying cycle for the summer touring season, which is less affected by the conservative economic environment. M Audio has also bucked the trend of lower consumer spending largely due to new audio interfaces, mobile recorders, keyboards and speakers. Looking at consumer video, as Joel mentioned, we had good topline growth of about 13% year-on-year, which is encouraging given overall concerns about consumer spending. We also had good reviews and a national sell-in of Pinnacle Video Transfer, which allowed customers to record video for viewing on an iPod or a similar device without the use of a computer. And Pinnacle Studio Ultimate won the prestigious PC Magazine Editor's Choice awards for best consumer video editing product. So we had many positive signs and good topline revenue growth but an unfavorable product mix led to lower operating margins, and we will be looking to tightly control costs in order to increase the profitability in our consumer video business. Ken will now provide an update on our ongoing review of Avid's operating model, Ken?

Thank you, Gary. Although, we posted a loss in the first quarter, this result was in line with our expectations. This loss was a result of the downturn in revenue combined with the operating expenses increasing slightly on a sequential basis. We have also been making certain strategic investments as we look to transform our longer term operating model. As Gary mentioned, I as well as a number of other executives recently joined the management team. As you know this management team is heavily incented towards increasing long-term shareholder value and we are focused on a number of initiatives to accomplish this goal. This effort includes working on an in-depth strategic review of Avid with a goal of creating a more customer-centric business that will accelerate growth and improve operating margins. We expect to discuss the results of this review during our Q2 results conference calls in July 2008. Given that the outcome of this strategic review is expected to result in several changes to Avid, it will influence the longer term financial model. As a result, we will not be providing guidance on this call, but plan to update our annual guidance in July. Although, we will not be providing guidance at this time, we expect to see improvements on our bottomline as the year progresses. This concludes our remarks, now we would be happy to take your questions.

Thank you, the question-and-answer session will be conducted electronically. (Operator Instructions). We will first go to Paul Coster with JP Morgan. Paul Coster - JP Morgan: Yeah. Thank you very much. I'd like to just dwell upon the end markets for a moment, just coming back from NAB, my sense was that people feel pretty good about Pro Video and post-production on the video side obviously, you got the Beijing Olympics, The Presidential Campaign and Euro Championships, if the market is growing and you are declining, are you losing market share, would you agree with the overall sort of depiction of the market.

So let me take the answer to that question. So just to summarize, I believe what you said is it felt pretty robust in NAB, market growing, are we losing market share? And you really spoke to two markets; one is the post market which is a traditional editor market for Avid as well as the Wildcat, what we would refer to as the broadcast market here. We're taking a close look at what is occurring in the market in the first quarter as we take a look at that, in terms of visibility in the national news organizations, in terms of visibility in the national production organizations, important posts, Avid remains the standard there. And we are clearly -- most of the Olympics as an example will be broadcast on our equipment both for news and sports as an example here in the United States. Nevertheless, I'm still sorting that through when we are taking a look at a very specific question as part of our strategic review as to where we are going. We have discontinued products, as you know our media streaming product, which we discontinued last year. We also, in the video space, announced a new product, new products during the course of the quarter. You might remember our March release and that slowed down purchasing decisions as people read -- awaited new products. We also know that some of the other large companies that have reported first quarter in the broadcast space had a slowing of sales for economic reasons. So it's too early for me to yet be able to answer your question. I have the same -- I am certainly looking at the same issues, sort of have the same concerns that you imply in your question. But it's too early for me to say whether we're losing share or not in that regard. I will say that I think its part of our strategic review, you will see as much as -- the media stream as much as we canceled a disk project, which we talked about in the last quarter's call. I think you will see us first shrink our footprint before we then more aggressively grow the remaining footprint that is there. Paul Coster - JP Morgan: Joel, can you just provide a little bit of color around the $22.9 million, I think I heard, of corporate infrastructure that you're excluding from the contribution margin and why you are excluding it again.

Joel?

Yeah, so the key there is we want to provide a little bit clearer view to the business units, so not have them focused on corporate G&A allocations and so forth but really focus on their business, plus it also allows the corporate groups as it's pulled out separately to more focus on this on a worldwide basis and try to look for better efficiencies and how we can do things a lot clearer, a lot more efficiently. Paul Coster - JP Morgan: Are these expenses persistent elements of the Avid business model on a go forward basis nonetheless?

Yeah, I would say when you look at that, about half of that would be a normal G&A items like finance, HR, legal, audit director fees, insurance, et cetera. There's another 25% made up of corporate costs like CTOs, CEOs, business development, corporate marketing, and the balance would be information technology costs that are not allocated to costs of goods sold that we're keeping in this corporate view.

So to be clearer on this thing from a different perspective is a couple of things; number one, we want to be sure that the business unit heads were able to have costs that they could directly control and be held accountable and responsible for that. So as part of the operating model, we want not only responsibility but accountability, and when you have a bunch of allocated costs, [peer] costs are allocated mainly on revenue, people feel like they -- not only feel it is hard to sort through, and actually isn't as transparent as it might be. The second thing as you know, one of the things that Ken and Joel have worked on is taking those costs, which were indeed in the business units last year and creating shared services organizations so that we can be more efficient. So that's the second change associated with it. So it's not just an accounting or reporting difference, it really is an operating model difference in a business or I should say business model difference in the way that we're approaching this. And to become more efficient and that's part of the review that Ken, Joel, and myself are doing on that. Paul Coster - JP Morgan: Well, maybe just one last question there then, I mean I think many investors will be frustrated by the pace of which the business has been sort of restructured and it sort of feels like it takes a little bit of a pressure off those operating units. But I'm sure you said otherwise. And once you finish this strategic review, the writing of the business model, can you sort of commit to it happening quickly thereafter? In this calendar year for instance?

Yeah. First of all, I'd like to share more of that with you in July which is what I think, which I also said in the last quarter. I think you would see some short-term corrections. I do think there are some things that can take a period of time to occur. For example, during the course of this quarter, we actually entered into some offshoring agreements to be able to start doing some developments overseas in our engineering organizations. Well, you can't just jump existing projects overseas, that has to occur with time for a whole variety of reasons, and as well as new projects. So I think some you will see some things that we will do and by the way we're not waiting, we're doing some of those things right now even though it may not be apparent in the first quarter, we actually are taking operating cost out of our business everyday as we move forward. And you will see things continue to occur when we share that strategy. So they will be both a combination of short-term as well as a long-term view, which we will share with you so you will have visibility to that. Paul Coster - JP Morgan: Okay. Thank you.

And next, we move to Steven Frankel with Canaccord Adams. Steven Frankel - Canaccord Adams: Gary, the new products that were announced at NAB, will they ship in material volume in the second quarter enough to have an impact on the business, or should we think of these as products that really are more meaningful for Q3 and Q4?

So the answer to that question is we're sooner making them available. So the question being is what about the availability of our products? We are on schedule for availability of those products during early June. We were, of course, working with customers, they are available for customers and many of our customers were testing them today. We certainly have made sure that we can ship as much as customers want during that. So we're not -- unless we have some phenomenal, which we certainly hope for, order, we certainly are in a position to meet customer demand for it. Of course, a part of it is ultimately going to be driven by the customer demand as we reported in all of our comments; we received early very positive indications, I know you were at NAB, and your report was positive on it. So it's looking good, but we don't have some -- we do not at this stage foresee a limitation on our ability to ship. Steven Frankel - Canaccord Adams: Okay. And how should I think about those products' impact on gross margin, especially given the fairy aggressive pricing approach?

Yeah. I'll let Joel answer that question and then I'll come back over the top of that.

Well, basically, we believe the gross margins will be flat on that. We have some efficiencies in making the products and also we believe that this is not far different from what our ASPs have actually been. I believe what we were looking for is number one, making our current customers happy with what we are offering. But I believe at this price point, we're hoping that we will be able to pull in a lot more new customers that at this new price won't be ready to jump into our products.

So I would like to complement that with is as you know Kirk Arnold joined us to run the video division during the course of the quarter, and Kirk brings a lot of discipline to the business. And as Joel mentioned, that these aren't a lot different from what our ASPs are, and our message is pretty straight forward in working with our partnership with the dealers, and ultimately, sales people, but particularly dealers sort of self-adjust on their own to the realities of the market. So as we created both value-based and market-based pricing with the new pricing, what we have said, okay, great, we're meeting the demands of the market, but we do not intend to have the loose discounting that we have had in the past. Again, a business model change of what we are doing into the point Joel is making. The second thing is part of our other efforts particularly in the supplier area, and the logistics areas, we've been working on driving that more efficient manufacturing relationships. And we actually can produce, particularly our hardware goods for substantially less cost than we would. So when Joel said flab -- and Joel, correct me I'm in wrong, I'm sure you're referring to the percentage -- gross margin percentage.

Absolutely, Gary, it was the percentage I was talking about. Steven Frankel - Canaccord Adams: Relative to what we saw in Q1 or relative to what we should think of as a normal run rate for that business?

I would say what we saw in Q1 and a normal run rate, both. Steven Frankel - Canaccord Adams: Okay. But Q1, that's kind of a new low for gross margins in the recent past.

Right. And there were a number of factors in the quarter, including getting prepared for the new line up in pricing we put out that we had to take some reserves this quarter that affected the margins, which will come back to us in future quarters. Steven Frankel - Canaccord Adams: And are those new products sourced with some of these new relationships you have or are those products that are going to get better overtime as you are able to ramp-up these new relationships.

So it's less about, I want to be clear, it's less about new relationships and working with existing manufacturing to tell them that we need better visibility into their cost that we need different cost structure with them or that we will have new relationships. I think over the course of time, one can anticipate new relationships will become part of it. So these are based on those negotiations, which the team under Joel has lead, cross business unit team has led both in the logistics area as well as the manufacturing contracting as we go through this. And secondly, the design factor and form factors of some of these items have been improved considerably. I would hope that we can improve it, but I don't want to commit to that at this time. Steven Frankel - Canaccord Adams: All right. Thank you.

Next, we move to Jim Ricchiuti with Needham & Company. Jim Ricchiuti - Needham & Company: Hi, good afternoon. I was wondering if you might be able to provide a little bit more color on the decline, year-over-year decline in the professional video business as it relates to the international and domestic business. Was the domestic business down more that the international business?

Well, I would say international was down a bit more mainly because of the large deals and in Europe, we had fewer large deals this quarter. So international was down a bit more than domestic. But to give you a little bit more insight on the reduction year-over-year in the video, it's about $18 million and though we were facing competitive pressures in the editing field and we have put in this new editing line of aggressive pricing, I will tell you that the volumes year-over-year were up. But because of these pricing pressures, that's what reflected the lower revenue. Jim Ricchiuti - Needham & Company: How is pricing in some of the other areas of the professional video business?

Pricing across the board was a little bit down, but it was really acute in the lower end of the editing business, that's where we really saw the effect. Jim Ricchiuti - Needham & Company: Okay. And just with respect to the fact you saw fewer large deals, can you provide a little bit more color on what maybe behind that?

Well, as you know, the large deal business, it can be kind of lumpy where one quarter, a lot of its dependent on customer acceptance and so forth. We had a very, very strong quarter in Q4 and alternatively, we had a fairly weak quarter this quarter in the number of deals. We do not expect that as a trend, and we still have our good pipeline and we look at this business, again, it is lumpy and dependent on acceptance. So we don't see a problem with it. This quarter was light. Jim Ricchiuti - Needham & Company: Okay. And so the build up that we saw in deferred revenue, any sense as to how we could see that maybe over the next couple of quarters?

Well, the buildup you saw in deferred revenue was more of a first quarter phenomenon, really around the maintenance contracts. We typically get renewed at the beginning of each year; that's what really drove the deferred revenue up. Jim Ricchiuti - Needham & Company: Okay. And lastly, just switching gears to the audio business, can you give us some sense as to when you will see full compatibility with the Pro Tools?

What do you mean, with the Leopard? Jim Ricchiuti - Needham & Company: Yes.

So, first of all, we were working very closely with Apple and this has to do with some low level hardware issues with support from the operating systems. Pro Tools, a lot of its performance is managed by working directly, not working directly, but working at a very low level with the hardware. I can't really comment because I can't comment on Apple's dates for releasing their OS. What I would say is we have a lot of confidence it will occur in the next couple of months. Jim Ricchiuti - Needham & Company: Okay. Lastly, Gary, just as we look at the overall environment, you've got some drivers, that normally would lead to stronger demand in the video business, the presidential election year and heavy sports calendar with the Olympics and other events. But we also are seeing more evidence of slowing spending in advertising, slowing ad spending. How do you see that playing out? How much of a concern is that for you? Have you heard much concern from your customers expressed along those lines?

So, first of all, when we talk about or video customers, it's a pretty broad set of customers... Jim Ricchiuti - Needham & Company: Sure.

…as you know. But what I would say is that a lot of our customers, and I'm learning the business, learning the cycles of the business, so a lot of our customers actually prepared for the presidential election year and their sort of deadline for getting prepared was I'm going to say January 1st, but really, Super Tuesday. We had a lot of -- I was literally visiting customers the day before Super Tuesday and they were sharing with me how they made some investments, seeing that as sort of the big kick off to the presidential season. Certainly there are some people that are also doing some things and doing some things with us prior to the conventions, the obvious conventions that are out there. And I think that they see those as an opportunity to upgrade their environments regardless of the economy, on the positive side, and the Olympics is another example of hey, it is occurring, we want to be sure we put our best foot forward. On the other hand, I think what we're also seeing is that these organizations -- the news organizations particularly are part of large corporations themselves and the -- being part of large multinational without mentioning their names, companies out there, they really know how to sharpen their pencil and push hard when it comes to the purchasing decisions. And this is probably what Kirk will be bringing to the table. They certainly are feeling the pressure, not just on the advertising revenues being down, but particularly, in the last month, you've probably seen some stuff about the shifting of advertising from broadcast and cable media to new media which again, with our Avid Editors you can repurpose into that environment, but clearly, customers are feeling that. I don't think there is any doubt of that. And while it didn't show up as much in video, and some of this is execution driven in audio quite honestly and that's why Kirk is here. And I think we did see that and I think Joel commented on it on ICON as an example. Jim Ricchiuti - Needham & Company: Okay. Okay. That's helpful. Thank you.

Next, we will move to Mike Olson from Piper Jaffray. Mr. Olson, your line is open. Mike Olson - Piper Jaffray: Can you hear me now?

We can hear you now. Mike Olson - Piper Jaffray: Okay. Beautiful. Just a follow on question regarding the recognition of fewer large broadcast deals in the quarter, was it a shortfall that was a result of fewer broadcast deals being signed or was it more an ability to recognize the existing large deals that are there, like the company has kind of had issues the last couple of years, or was it a combination of both?

Basically, it was, you know, as we work for the implementation of these deals, it was around getting through and getting customer acceptance. In the past, we have talked about things like functionality commitments and things like that that had to be delivered that has nothing to do with that. We pretty much cleared the majority of that out of our pipeline. What this had to do working through the large deals and getting customers happy and accepted. Mike Olson - Piper Jaffray: Okay. That's helpful. And then as far as not having any guidance for the year, just from a high level, do you want to say whether you expect to return to pro forma profitability in the next couple of quarters?

At this time, we're not really providing any guidance of any kind or updating our guidance. Once we start updating it a little bit, you have to update it all the way. So we plan at the July conference call to really provide guidance at that point in time. Mike Olson - Piper Jaffray: Okay. And then just one last question kind of high level here is I mean this is clearly a lengthy transition period for the business and what kind of high level timeline do you feel like it transitions on, are you going to look back this fall and say that we're through the majority of the business model changes and is this something that really is an initiative that continues through the remainder of '08.

First of all, I would much rather address a lot of this stuff in July, but just to set expectation, the same expectation I've shared with our customers, I shared on the call last quarter. I think what we're going to be able to do is, in July, hope to share a couple of things with you a vision for the company, strategy for the company and business model. I'd be quite honestly, very surprised if I wait, if we as a company wait until we actually have the call to have the -- to put many of the business model changes in place. That being said is I think at the top level, I think one can anticipate business model changes to be in place very quickly, to trickle that down all the way through the organization just takes time. As you realign, I think I shared with you on the last call that I intend to be customer -- we intend to be customer driven in our approach to the market. And as you realign the customer-driven, realigned leadership, it takes a while to line up all the leadership. In terms of the major business model changes, I would anticipate, first of all, I would be able to share my view well into the future with you in July and that the vast majority of those changes will be able to be put in place very, very quickly. AKA, I do not intend to be leaking stuff out in Q3, Q4, et cetera. Hopefully, that addresses your question. Mike Olson - Piper Jaffray: Thanks very much.

And next, we move to Allan Davis with DA Davidson. Alan Davis - DA Davidson: Yeah. Hi. Just a couple of questions here. With regards to the professional video business, can you give us an indication of where backlog trended at the end of the quarter relative to where it was in December?

So I would say that backlog is not something that we continue to talk about, it was very relevant while we have those technological commitments out there that were kind of stalling the backlog, but now, that seems to be a more natural trend of just implementation and getting acceptance, we really don't talk about that. Having said that, we are happy with our pipeline and our pipeline of deals and we're working through those. And I wouldn't look at the level of big deals revenue in the first quarter as any type of trend. This is lumpy and it just goes quarter-to-quarter as we complete these large transactions. But again, since it no longer depends on any type of future functionality commitments, we're really not talking about levels of backlog anymore. Alan Davis - DA Davidson: Okay. And now, I guess how would you characterize new deals than in the quarter? Can you talk about that?

Well, we don't talk about bookings or anything like that because it's not a GAAP measure. Again, we're working hard this quarter. We're working through these large deals. There are lots of deals that we're working on and the key for us is to complete implementations and get acceptances and get customers happy as quickly as we can to be able take the revenue. Alan Davis - DA Davidson: Okay. Fair enough. And Gary, I'm just curious on the new professional video products. I'm just wondering whether it's probably combination of these things but whether its specific new functionality or the price points from what you believe to be your customer's perspective, kind of, what of those gives you confidence that those will drive improved Pro Video sales in the second half of the year. Is it functionality, is it pricing, is it combination?

Yeah. As usual, it's the combination. I don't think it'd be any one thing. First of all, I don't think it is pricing per se driving it and I think with pricing we're eliminating any obstacles the way I would describe it. What I would describe and we talk about quality and performance and value, obviously pricing in relation to the value equation. But I do think that the quality and performance are two very important things. The company have had some releases that just were not of the quality that they should have been. I think maybe even a generation of the products that were not of the quality they should have been. We really double down on the quality effort and quality is both about hey does it work, but also the quality of the user experience. And there's been a huge focus on that. And if anyone wants to go through to the details just please let me know, what I mean by the user experience and all that that hides best offline. The second thing is that we have put in some key features into the system. We have a much stronger HD workflow, high def workflow that's out there. As you know, high def is very important in the broadcast industry today. So we've dramatically improved it. And while you and I as consumers and one of the things I learned when I got here the word HD, as it turns out there's multiple standards in that world and you need to be able to mix and match. And we fit in the first product that's really able to mix and match. We've also incredibly improved the performance of the product, taking advantage of the multi-core processors that are out there, taking advantage of the 64-bit operating systems that are there. And very importantly, one of the things we did is in the past we've been Windows-centric and Windows remains a very important environment for us. But with this release and one of the things that Kirk and I have encouraged the organization to move forward more quickly with. This will be the first release in many, many years, which the entire media composer line will be available simultaneously or at all by the way, one of our products -- high-end of the product never had been available on both the Macintosh and Windows platform. As you all probably know, you saw Apple's results this week, the Mac is doing well. It's doing well in the Corporate America, it's doing well in the corporate front. So we shouldn't lose site of these very important capabilities and features that the development team has put in place in the product and we go on and on, but I highlighted some of the things that you and I can relate to in the products. So it's a combination of things. Alan Davis - DA Davidson: Okay. Fair enough. And lastly, it's probably an obvious question but with the no guidance, just to be clear so you're effectively pulling your past guidance? Is that how we should read it?

No, we're not pulling anything at all. Alan Davis - DA Davidson: I just want an update there.

I think we're consistent with what we said in the first quarter, which was we're not providing guidance for the year. We talked about our performance for the first quarter. And today, what I did say in my comments is we talked about improved operating margins moving forward. But we haven't provided any specific. We have not provided specific numbers for the year. But certainly, I would say go back to what we said in Q1 and certainly profitability remains a big goal. And one shouldn't miss the fact that we did generate very positive operating cash in the first quarter, as well as we're doing some of these things so we're very, very focused on our bottomline.

This is Joel. To expand that, we are not changing anything. We're not commenting on or updating it. So anything, what we're doing now is the same. We will update anything that we said previously on the July call. Alan Davis - DA Davidson: Okay. Fair enough. Thank you.

And next we'll move to Andrew Abrams from Avian Securities. Andrew Abrams - Avian Securities: Just one or two questions. I'm not sure Joel what you meant when you are talking about the new product ASPs being kind of similar to what - at least I thought what you said was that it was already similar to what the dealers had already been using as ASPs. And that the net effect of it would be higher volumes with slightly lower ASPs. I couldn't quite --

All right. So what I meant Andy is that the price reduction was off our list price. What I was saying is with many of our larger customers the actual pricing charge is not that much different than where we moved our pricing to is what I was saying by ASP. Andrew Abrams - Avian Securities: Got you.

But there was a much heavier discount. As Gary mentioned, we're going to be doing a lot more -- having a lot more discounting report. The list price is down closer to where we saw the ASPs in reality. Andrew Abrams - Avian Securities: Got you. Okay. And with the new structure of the contribution margin, I get the impression that you've gotten pretty far along on at least on the financial side in consolidating some of the operations that were fairly disjointed I guess from one division to another. First of all, is that true? And second, where do you stand on the development and marketing sides as far as getting some kind of commonality between the various product divisions and types of products. Have you made any progress there?

So what I'll tell you is we've really just started with the shared services on the corporate side. And now, in finance, we've pulled a lot of the back office functions together and shared service centers for the US and Europe. There's a lot more we can do and that we're looking at. In addition, Ken Sexton and I are looking across all of the G&A functions and all of these other areas you mentioned like manufacture and so forth to see where there's more efficiencies. And this is part of the review and work that we're doing right now that we hope to update you on in July. Andrew Abrams - Avian Securities: Okay. So as far as we're concerned right now, those were all still at the kind of non-operational stage there. They're still in the decision stage, is that correct?

No. Some of it has already been implemented like shared services we're fully functional in finance on the back office accounting pieces. Again, shared services can be applied to many, many functions and we're looking across the company now to see where we can use the power and strength of the company to be more efficient.

And I think if you look at some of G&A functions, although they've put a lot of the functions together because we have to really build some of the processes and some of the systems of their commons, we haven't gotten a lot of the efficiencies out of it yet. We've really combined the groups working towards a common goal but really have not been able to optimize them yet at this point in time.

I would summarize to say there are some things that are in place that we've been working on. But we have a lot of work to do and are in the midst of it right now. Andrew Abrams - Avian Securities: All right. Okay. Thank you. I appreciate it.

(Operator Instructions) And next, we'll move to Chuck Goldblum from Emancipation Capital. Chuck Goldblum - Emancipation Capital: Hi, there. A few quick questions. First of all, what's the current share count?

37.4 million at the end of the quarter. Chuck Goldblum - Emancipation Capital: Okay. Second, will you guys be continuing your buyback after the window opens again?

We plan on evaluating that. We have a little bit over $80 million of our authority still left. After the window opens up, we'll continue to evaluate our current cash position and where the markets at and decide what we're going to do on when we execute on the additional authority we have. Chuck Goldblum - Emancipation Capital: Okay. And in the last conference call, both of you had -- I guess all of you had discussed that you wanted to see Avid return to industry level operating margins for a company this size whether 10%, 15% or higher. Can you - three months later, perhaps give us a view on the likelihood of that happening and not tell us when, but that you think it'll happen and your confidence that it will happen.

Chuck, this is Gary. Are you asking if that will happen at all? Chuck Goldblum - Emancipation Capital: No. Well, put it this way. I think when you started, you first commented that I think this company can get back there. I imagine three months later you have a higher confidence one way or the other.

I still do. So the question is, is I think you had asked me the question and I had given the answer of, I believe we can get to the industry standard, profit margins. I don't want to provide -- if someone is asking me, hey, is it going to happen this year, next year, whatever, we're not providing guidance. Yes, I still feel very good. I think that there's a considerable savings opportunities inside of the company. I think, Ken has commented on some of them, Joel has commented on some both across business units activities, as well as just more efficiency in our shared services and it's been taking advantage of, for example, let me use one example, Chuck. I mean, of course, this is in this year's results. We made a decision not be an AV. I don't know what we're going to do for next year. But it turned out pretty successful. The results were pretty successful and for -- if you talk to any of your colleagues or peers that were out there you know that and read the press it was pretty well received. So we're going to take a look at thing at that that allows us to continue to invest to have strong marketing efforts to invest in strong engineering efforts. But yes, we feel pretty good about it. I do think that we have some particular work to do and you all collectively on this call have asked this question about the gross margin side. We've got to do some work to improve and have better predictability to our products mix on that. But yes, I think it's fair to say we have good confidence. Chuck Goldblum - Emancipation Capital: Okay. And just to ask in a slightly different way. I think when you came originally your comments on reaching industry margin were more of like general in as much as, any software company ought to be able to get to those margins. Do you sort of feel like now or three months later that you have the sort of the sightline for that whenever it may happen?

The answer is, is I think by July we'll have that sightline with some specificity. I think I have some broad -- I think I have something better than generalities at this stage of the game. I think just as the reminder of the timeline I shared with you all as I've said sort of, I'll get there, spend my first 100 days, sort of trying to create a hypothesis by the way. I visited ignoring events like NAB, ignoring large customer events where we've had several hundred people turn out. I visited that 70 or 75 customer sites since I last spoke with you all as a matter of fact. And as the result of that, I have a pretty good hypothesis and that I'm creating with the management team of the company and we're starting to put that into operational terms and we've already had our first meetings on that. And putting that in operational terms, those margins are starting -- we're starting to see those margins. I definitely had said it is a software company. I would say as I take a look at some of our product mix as we go through there, some of this is clearly not software to the point that's some of the questions you're asking and we've got to ask a questions ourselves things about the product mix there, the things that won't support higher margins as we get there. But yes, I have a reasonable sightline at this stage, Chuck. I don't have every specific at this stage. Chuck Goldblum - Emancipation Capital: Thank you.

I'm not just talking off the top of my head anymore. Chuck Goldblum - Emancipation Capital: Super. Thanks.

Yeah.

Next, we'll hear from [Jeff Lipton] 36:35 from Connected Capital. Jeff Lipton - Connected Capital: Thank you. Good afternoon. So I think it was Joe you talked about competitive pressure in the video editing fields where volumes were up but pricing was down. Can you give us a little bit more color on that? So for example, can you give us a feel for how much volumes were up, was the competitive pressure across the industry or was that mainly due to Final Cut? Can you give us a little more color on that and then I have a follow-up.

Well, on the volume side, we're seeing year-on-year. We think -- based on our information, volumes are up around 10%. I can't comment whether it was a direct competitor of Final Cut Pro or others. But I do know that our revenue was down, our volumes were up and we did have lower pricing year-on-year due to the pressures that competitors are putting on us. So to me, the good news is we didn't lose buying. We gain buying during the year. We have additional volume but we've had to react to the pricing pressures and I think we've -- what we've just announced with our new line up and our new aggressive pricing I think we have done what we need to do. Jeff Lipton - Connected Capital: Okay.

I want to comment on it for a second as well because I do think that we found ourselves responding to "pricing pressure" in the market or Final Cut as you mentioned. And we sort of responded to it by saying well, great, same thing, lower price. One of the things that we really, that in terms of spending this time with the customer that we've discovered and that Kirk is implementing in the organization is hey, this isn't just a mode of transfer. If all you're trying to do is to get from downtown out to our offices in Boston and you don't care how you get there whether you drive the VW or whether you drive another car is irrelevant and so hey, price makes a difference. But if you want the ultimate driving machine which is what Avid customers want then there's a big difference. And in the case of Avid, what I discovered is that Avid is designed to support the workflows. The reason it so successful in broadcast because it understands news workflows; it is considered the premiere news environment that is out there. For the professional editor, post production editor and this is also why Pro Tool is so successful is we understand that workflow for creating excellence in journalism, excellence in feature, excellence in scripted television, excellence in so many of these things while Final Cut is the bag of tricks. We had not created that differentiation and there was immediate reaction. Again, I think that's a difference that leaders like Kirk bring to the table is helping getting that message out. That's part of the message and I think that's what why heard such as policy or response with NAB in terms of helping create that differentiation. So what we want to do is separate ourselves. As I've said, I think with price, we can eliminate an obstacle but we don't want to make it if we're not making the price a feature of our product. Jeff Lipton - Connected Capital: Okay. So one other related question in the audio business and obviously Apple cut the price of Logic substantially when they upgraded and they put a lot more in the package. Do you find that that has had an impact on your business goal?

So the question is about Logics. We have not today found that that has created a pressure. There is a tremendous difference. First of all, Pro Tools had -- there's a tremendous difference. One is Pro Tools really has managed to create a linkage between the between the early creative artist, the early artist all the way through to the most professional artist whether they are appearing in a concert or whether it's a major feature film. We create a continuum that Apple has not been able to do that with Logics. The second thing is that saying out of the marketplace from customer when you talk to them is that Logics is il-Logics and that's sort of the word of mouth that's out there. And again, I think a reflection of the successful workflow on Pro Tools. Now, on the other hand, I am paranoid about it. I don't want to lie to you and say I'm not. Today, it's a healthy paranoia and we're going to watch it but we aren't seeing yet that pricing pressure but certainly, we're cautious to repeat it. Apple is a phenomenal distribution organization. We are keeping a very, very close eye on that and we want to make sure that we can keep the differentiation and keep the Pro Tools line out in front. Needless to say it's working on effort but, we are being very cautious about it. So it's a very -- your question is a very good question. Jeff Lipton - Connected Capital: Okay. Thank you for the clarification.

I'll now turn it back over to our hosts for closing remarks.

Well, thank you all very much and my with my technical acumen I can't even manage a mute button. I got suddenly off earlier, I apologize. But I think that you're going to hear that there is some momentum building in the business. The momentum that you've been able to observe is momentum about maybe external things, our success in NAB, the new video products and what we were doing. As you can tell from our comments, we are also working very hard on our operating model and our strategy. I'm looking forward to sharing that with you on our Q2 calls as we enter into Q3. I want to thank you all for so many great questions this evening and I look forward to talking to you all in the quarter if not before. Thanks.

That concludes today's conference. We appreciate your participation. You may now disconnect.